PRA proposals aim to clarity friendly society amalgamations and transfers

The consultation, published on 22 July, proposes updates to Chapter 4 of the PRA’s statement of policy SoP3/15 on the PRA’s approach to insurance business transfers. Chapter 4 is concerned with friendly society transfers and amalgamations under Part VIII of the Friendly Societies Act 1992. The regulator said the changes are intended to make the process easier to navigate, particularly for smaller mutuals and firms with limited experience of transfer transactions.

Chris Riach, insurance regulation expert at Pinsent Masons, said: “The PRA's proposals are less about changing the substantive legal framework for friendly society amalgamations and transfers and more about providing firms with greater transparency and detail around how the regulator applies that framework in practice. By codifying existing supervisory practice and approach, setting out a clearer sequence of steps and providing additional guidance on areas such as member votes, actuarial reports and confirmation decisions, the PRA is seeking to reduce uncertainty and unnecessary burdens on firms and help them plan transactions more effectively.”

Among the proposed changes are a more structured description of the transfer process, additional guidance on member engagement and voting requirements, greater transparency on when the PRA may dispense with a transferee member vote, and more detail on the circumstances in which an independent actuary’s report may be required. The regulator is also proposing a degree of procedural flexibility, including allowing oral updates during representations hearings where appropriate.

The consultation follows industry feedback that Part VIII transfers can be complex and difficult to navigate, particularly for smaller firms. The PRA said its proposals are intended to reduce unnecessary friction while supporting the long-term sustainability of the mutual sector.

Hammad Akhtar, Corporate Insurance partner at Pinsent Masons, said: “The consultation should be welcomed across the industry but in particular by smaller mutuals and firms with limited experience of Part VIII processes, as it offers a more structured roadmap through what can be a complex and resource-intensive exercise. There is increasing recognition of the need for consolidation in the friendly society sector.  If implemented the proposals will provide helpful clarity and, in doing so, ease the pathway for more consolidation.”

Under the proposals, the PRA would present the transfer process in five stages - planning and preparation, recording and analysing the transfer, member engagement and voting, formal application, public notices and representations, and confirmation assessment meeting(s) and related processes. The step sequence is not intended to be prescriptive; the regulator acknowledges the need to preserve flexibility for firms to adopt a different approach where required. The regulator intends the clearer sequence of steps to help firms oversee transactions and identify issues earlier.

The PRA said the changes would advance its objectives of policyholder protection, safety and soundness while supporting competition and growth by reducing information barriers to entry, restructuring and orderly exists.

Despite the emphasis on flexibility and efficiency, the regulator has underlined that consumer protections remain an important feature of the regime.

“Unsurprisingly, the PRA is careful to mention that member and policyholder protections remain central to the regime, and that greater flexibility and efficiency in the process will not come at the expense of those safeguards”, said Riach.

The consultation closes on 22 October, with the PRA proposing that any resulting policy changes take effect when a final policy statement is published – expected before April 2027.